Like many wirehouse financial advisors, Steve Wilt began surveying the independent advisor model a little more than a year ago. Even back then — before the writedowns became a steady torrent and the headlines turned into a graveyard of woes — he was fed up. And then, suddenly, Wall Street as we knew it was destroyed. Wilt's exasperation turned to outrage, and he decided all he wanted was to focus on his clients “without all the noise,” as he puts it — no investment bank, no proprietary products, no mortgage-backed products, no government rescues. “I didn't want any conflicts,” he says.

Over ten months, Wilt says he ran six to eight different analyses of how his team's business — $1.4 billion in AUM, mostly pensions, small 401(k) plans and high-net-worth individuals — would fare in different models. He also analyzed how organizing his team as an independent RIA would benefit his clients. Wilt had three broad requirements: He wanted top-shelf research, adequate support staff and a robust technological backbone — the kind of package he says wirehouses were once known for providing to top brokers. On the other hand, he realized that he didn't want to open his own advisory shop, not while the world was in the grips of a brutal bear market and recession.

“We looked at the price of real estate in Akron, what financing would cost, insurance, technology, staffing, we crunched it all,” he says. And they didn't like what they found. “It's not the greatest timing to be uprooting your business, period,” says Wilt. Besides, why spend money to duplicate infrastructure systems and hire personnel when it already exists at other, like-minded firms? So, in January, after 20 years at Merrill Lynch, Wilt decided to join an established independent RIA, Captrust Financial Advisors. In another market environment Wilt would probably have launched his own RIA, but not this year. “It certainly would have been a heck of a lot harder to start and finance my practice on my own,” he says.

Wilt is not alone. These days there are scores of “breakaway brokers” joining established RIAs instead of setting up their own shops. Numbers are hard to come by, but estimates put the average number of breakaways at around 1,500 FAs per year — and that was before the credit crisis. Certainly the most entrepreneurial of advisors will continue to go it alone no matter the economic climate. (After all, RIAs get to keep 100 percent of their revenue — well, after rent and expenses.) Custody and clearing firms — which provide the plumbing for independent financial advisory firms — say they've noticed that FAs are asking for advice on finding new homes with reputable RIAs. And the custodians don't mind playing this matchmaking role.

“It's definitely a growing trend,” says Schwab Institutional's Barnaby Grist, managing director and head of Schwab's wirehouse recruiting effort. “There's been a significant shift in interest toward joining an existing RIA firm in the past 12 months that no doubt has been accelerated by the state of the economy.”

Grist estimates that last year 80 percent of the so-called breakaway brokers who left wirehouses and became RIA clients of Schwab did so by starting their own RIAs. “If I had to guess I'd say this year you'll see the number of joiners double,” he says, an estimate he admits is based only on his own observations.

But he isn't the only one saying as much. His chief rival, Fidelity Institutional Wealth Services, reports similar developments. “Last year, eight out of 10 breakaways wanted to start their own firm versus join an existing one. Now it's definitely closer to 50/50,” says Scott Dell'Orfano, executive vice president of the RIA unit. Recent developments at firms like Merrill, where retention bonuses didn't meet the expectations of embattled yet otherwise loyal advisors — especially FAs generating under $1 million in production — have added to the flow of prospective recruits.

Time To Move

There couldn't be a better time to recruit Wall Street's top advisors, either: They are poachable. Aside from UBS, the other wirehouse firm are different beasts these days. The model of the past decade has changed. (That's one reason, along with 200 percent-plus recruiting packages, the Swiss firm is raking in so many of its peers' unhappy FAs.) More importantly the fate of many of these wirehouse firms — including UBS — still feels uncertain, even with their giant mergers and their government bailouts. The fact is, for many advisors at these firms, any pride in or loyalty for the brand they once had is drastically diminished; now they're just concerned about their clients (and of course, their own net worths.) [Loyalty may never have been at a lower ebb. “The guys who are happy here are the ones who just arrived with deals worth 200 to 250 percent of their trailing 12,” grouses one veteran UBS advisor with more than $1 billion in AUM. “The rest of us who get nothing for loyalty are depressed and frustrated.”]

Plenty of competitors are hearing the collective complaining and getting proactive in their responses, including some of the biggest RIA firms in the country. “We're currently searching for two to four of the right kind of people,” says Chandler Taylor, a principal with Moneta Group, a St. Louis-based RIA with more than $5.7 billion in AUM. They're proceeding cautiously thus far, taking out ads in local publications and business journals, which has the added benefit of telling prospective clients who Moneta is, Taylor says.

Paul Tramontano, a former top producer at Smith Barney who left the firm in April 2007 to start Constellation Wealth Advisors with offices in New York and California, says he's experienced an “enormous uptick” in interest from friends and peers at any number of firms on the Street. In March 2008, Constellation added Jon Goldstein, another top producer from Smith Barney, and it is looking to expand again. Tramontano says he's been quietly interviewing several potential candidates in recent weeks.

Another example is Aspiriant, the firm created by the merger of San Francisco-based Kochis-Fitz and Los Angeles-based Quintile Wealth Management. After roughly a year coping with the integration and working out the kinks, COO Rob Francis says the new firm is now searching for talent to expand its reach to other affluent cities like New York, Chicago, Dallas and Miami. “Inorganic growth is one of the firm's top strategic initiatives for the year,” says Francis. He thinks the combination of the dislocation at the major firms and the economic uncertainty will influence more of the available talent to consider joining a firm like his. “The reality is, when you leave, you want to spend the majority of your time on your clients, especially in this environment,” he says. “If you don't have to negotiate a lease or try to get a website up, that's much easier to do.”

Custodians aren't sitting by, passively; they smell opportunity. Schwab, Fidelity and Pershing are actively trying to help their RIA clients recruit. This month Schwab will begin the first of 30 seminars across the country aimed at brokers interested in exploring the RIA space. In addition, Schwab plans to roll out educational seminars (online and on-site) for RIAs who wish to recruit wirehouse advisors. Pershing unveiled its “Advisor in Transition” program in December, which includes an online business evaluator tool that allows interested brokers to plug in current data about their own businesses along with what they're looking for — to start or join an RIA or independent b/d, geographic location, size of firm, culture and expertise.

“Chancing” It

Informal hook-ups are still common, whether through referrals or chance encounters. Like Wilt, veteran UBS advisor Bruce Lacy was disillusioned with what his firm (and the other wires) had become. With $55 million in AUM and trailing 12-month production of $850,000, 80 percent of which comes from fees, Lacy knew he was a prime candidate for independence. He asked around for months, but didn't find what he was looking for until he talked to the people manning the Schwab Institutional booth at an IMCA Conference. They interviewed him “thoroughly,” says Lacy, and eventually made some introductions. In January he left a six figure deferred compensation package behind and joined United Wealth Management, an affiliate RIA of United Capital Financial Partners, based in West Lake Village, California. “It feels almost like a hybrid model — something between the wirehouse and independent model,” says Lacy of his new firm. “In the end, I'm a corporate person. I didn't want to be out there on my own, especially not in this environment.”

The guy that hired Lacy, Doug DeGroote, says he and other RIAs he knows are aggressively hunting jilted wirehouse advisors like Lacy. And he says he's seeing a level of openness he's never seen from some FAs. Like the two Merrill FAs that walked up to him at a seminar he held recently featuring economic commentary from author and market forecaster Harry S. Dent. “These guys walked up after Dent's speech and I thought they were going to say something to the effect of, ‘Pretty neat stuff,’” he says. Instead, “They both wanted a chance to interview.” They wanted to join his firm. He says that floored him.

DeGroote mentions Kelly Trevethan, a San Francisco-based advisor with $500 million in AUM (one of Oppenheimer's top 10 producers) who also just joined United Capital, opening its first San Francisco office, Trevathan Capital Partners. He left a corner office overlooking the Bay Bridge — that and an industry plagued by conflicts. “I wanted full transparency, open architecture and powerful resources for my clients.” Like Lacy and Wilt, taking care of his clients was the first priority, and he didn't want to be distracted by running the day-to-day business. “The benefits have been huge,” Trevethan says. And so has the attention. He says his calendar is full this week and next with meetings with potential hires — all of them from wirehouses. Many, like Wilt, no doubt now see the freedom of independence as more appealing than ever. In this environment, many of the big RIAs offer the kind of safety they once knew at the wirehouses — but without the noise.